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House of Representatives Passes the Defend Trade Secrets Act of 2016

On April 27, 2016, the United States House of Representatives voted 410-2 in favor of the Defend Trade Secrets Act of 2016 (DTSA), after it was unanimously passed by the Senate earlier in the month. President Obama is expected to sign the bill into law within the next few weeks.

As we previously reported, the DTSA amends the Economic Espionage Act of 1996 to create a federal private right of action for trade secret misappropriation. Specifically, the DTSA authorizes a trade secret owner to file a civil action in a United States district court seeking relief for trade secret misappropriation related to a product or service in interstate or foreign commerce. The private right of action under the DTSA is in addition to the protections afforded by state law, meaning that employers will be able to pursue claims for trade secret misappropriation under both federal and state law.

The DTSA establishes remedies for trade secret misappropriation, including injunctions, damages, and—in “extraordinary circumstances”—orders “providing for the seizure of property necessary to prevent propagation or dissemination of the trade secret that is the subject of the action.” Like a temporary restraining order, seizure can be requested at the time the complaint is filed. Unlike most state laws, the DTSA further authorizes the court to award “exemplary damages” in an amount up to twice the actual damages in cases of “willful and malicious misappropriation.”

In light of recent U.S. Supreme Court decisions casting shadows over software patents (Alice Corporation Pty. Ltd. v CLS Bank International) and diagnostic methods (Mayo Collaborative Services v. Prometheus Laboratories, Inc.), the importance of trade secrets, and the volume of misappropriation suits, are both expected to increase. Companies need to revisit past practices on how best to protect their intellectual property. Existing non-compete, nondisclosure and confidentiality agreements may need to be updated.